Question

Your best friend who knows that you are taking macroeconomics came to you and made the following remark: “I just heard on the news that GDP is higher this year than it was last year. This increase means that we’re better off this year than last year.” Using your knowledge, how would you comment on his assertion?

Answer 1

Answer;

It can be said that we are better of this year, but it is not reflected instantly due to its lagging impact. An increase in GDP will cause an increase in employment opportunities. Per capita productivity also gets better. Besides, per capita income will also improve. But, these changes are reflected over a period of time and can be observed instantly.

So, a regular increase in GDP with increasing growth rate is necessary to get a feeling of better off than the past period.